Key Takeaways
- Bank of America identifies the current semiconductor downturn as a strategic buying opportunity following an 18% underperformance relative to the S&P 500
- The firm upholds Buy recommendations on ASML, ASM International, and STMicroelectronics amid sector weakness
- Industry projections indicate wafer fabrication equipment expenditures will surge to a minimum of $250 billion by 2028
- The bullish thesis gains support from a rumored Samsung-Broadcom foundry partnership valued at $200 billion over five years
- Nokia receives a Buy rating from BofA, while Ericsson and Logitech earn Underperform designations
Despite a significant selloff in semiconductor equities during 2026, Bank of America analysts view the current market weakness as a compelling entry point rather than a fundamental concern.
The Philadelphia Semiconductor Index has lagged the broader S&P 500 by approximately 18% from recent highs. Research from a team headed by Didier Scemama suggests this decline mirrors previous corrections triggered by trade policy uncertainties, contrasting sharply with the more severe 30% declines characteristic of genuine cyclical downturns witnessed in 2011, 2022, and throughout 2024-2025.
Bank of America characterizes the recent decline as rooted in geopolitical trade concerns rather than deteriorating business fundamentals. This crucial differentiation, according to the firm’s analysis, appears lost on many market participants.
Current sector valuations reflect approximately a 3x discount relative to average 2028 consensus projections. Semiconductor capital equipment manufacturers trade at an even more pronounced 6-7x discount, which BofA characterizes as the most compelling valuation opportunity witnessed in several years.
Bank of America’s Preferred Semiconductor Stocks
ASML stands as BofA’s favored large-capitalization European semiconductor investment. The firm maintains its Buy recommendation, highlighting elevated average selling prices and robust gross margin performance as fundamental tailwinds. Bank of America’s profit forecasts for ASML in 2027 and 2028 exceed consensus Street expectations by 6-7%.
ASM International appears positioned to surpass second-quarter earnings projections by approximately 11% when results are disclosed Tuesday following European market hours. BofA highlights capital spending acceleration from TSMC and Intel, robust demand from Chinese markets, and improving conditions across analog and power semiconductor segments.
STMicroelectronics completes the trio of Buy-rated semiconductor capital equipment names. BofA projects earnings capacity reaching $4.50 or higher in 2028, supported by a book-to-bill ratio standing at 2x and anticipated manufacturing optimization expected to contribute four percentage points of gross margin expansion by mid-2028.
Factors Supporting the Extended Growth Trajectory
Bank of America projects wafer fabrication equipment investment will climb to no less than $250 billion in 2028, suggesting consecutive years of approximately 30% annual growth.
A critical pillar supporting this projection involves a reported five-year, $200 billion foundry agreement between Samsung and Broadcom. Recent capital expenditure commitments announced by TSMC and Intel provide additional confirmation for the optimistic spending outlook.
TSMC delivered second-quarter 2026 revenues totaling $40.2 billion, surpassing both internal guidance and Wall Street estimates. Gross margin performance reached 67.7%, exceeding projections. The Taiwan-based chipmaker elevated its full-year 2026 revenue growth forecast to marginally above 40%, propelled by robust artificial intelligence processor demand.
BofA additionally dismissed concerns regarding potential memory chip pricing deterioration, noting that extended supply agreements executed by hyperscale cloud providers, automotive manufacturers, and consumer electronics OEMs substantially reduce crash probability.
Beyond equipment-focused recommendations, Bank of America designated Nokia as a Buy based on ā¬2.8 billion in order intake that analysts believe the market currently underappreciates. Conversely, both Ericsson and Logitech received Underperform ratings, with the firm expressing concerns regarding margin pressure and growth trajectory challenges for each company.
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